THE Bank of England’s 1.5% cut in interest rates has been met with a cautious welcome in Surrey.

While businesses and estate agents considered the reduction in the bank’s base rate from 4.5% to 3% to be a positive move, many will reserve judgement until they see whether lenders follow suit.

Experts said it would undoubtedly have an impact on Surrey’s housing market, boosting those with mortgages linked to the base rate. For fixed rate mortgage owners however, the news is not quite as good.

The Bank of England’s Monetary Policy Committee voted to reduce the official bank rate paid on commercial bank reserves by 1.5% on Thursday - the biggest single cut since 1981, taking interest rates to their lowest level since 1955.

The committee’s decision came in the wake of the global banking system experiencing its worst disruption for almost a century.

Surrey Chambers of Commerce president Chaz Brooks said it was a step in the right direction.

“If the rates are passed onto small businesses it could help immeasurably,” he said. “But it’s the availability of credit that is the main driver. For home owners, will the mortgage companies pass it on and how much will they pass on?”

He said the boost might encourage more people to start up new businesses. “This is a great start for getting a loan but businesses need more help to keep [the momentum] going.”

Huge savings

Pauline Hedges, head of policy at Surrey Chambers of Commerce, warned small businesses they would not see a difference immediately.

“It’s designed to rejuvenate the economy so banks will have the liquidity to lend to one another,” she said. “Do not expect to get the whole 1.5% offered to you.”

Mark Collins, branch manager of Guildford estate agent Curchods, predicted the interest rate cut would increase the number of first-time buyers in Surrey and the number of people moving home.

The rate cut, he said, would enable some homeowners to make huge savings.

“It’s good news,” he said. “It will stimulate not necessarily a recovery but a levelling of the market. People will stop panicking and it should give buyers more confidence.

“Smart people will see it’s better to have their money in bricks and mortar. People can get on with their lives. We have so many people who want to move but can’t.

“I’m confident we will see a U-turn [in the housing market] in the New Year," he added.

Christopher Dean, associate at Savills, Guildford, was not quite as optimistic.

“We’re not sure that lenders will follow suit so we are reserving judgement until we know what the big lenders are going to do,” he said.

Consumer confidence

Other members of Surrey’s business community have welcomed the rate cuts.

Shahid Azeem, managing director of Arcom IT and chairman of Guildford City Football Club, said: “It’s fantastic for small businesses. They should feel more confident moving forward and hopefully [with] less people sitting on the fence it will be good for small businesses needing finance.”

Malcolm Parry, who runs the Research Park at the University of Surrey, said it could help investment companies invest in organisations like the research facility if they thought they would get a better rate of return.

A Bank of England spokesman said: “The committee judged that a significant reduction in the bank rate was necessary now in order to meet the 2% target for CPI inflation in the medium term, and accordingly lowered the bank rate by 1.5 percentage points.”